Department of Education pauses collection efforts against student-loan debtors: Guaranty agencies garnish wages anyway

In response to the COVID pandemic, the Department of Education allowed student-loan debtors to skip their monthly loan payments without penalty until September 30, 2021.  That pause was recently extended to January 30, 2022. 

Thanks to the Department's forbearance, millions of college-loan borrowers are enjoying a respite from making loan payments, knowing that DOE will not charge interest and penalties during this grace period and that their wages will not be garnished due to nonpayment. 

But guess what? Loan guaranty agencies continued garnishing the wages of student-loan borrowers despite the federal moratorium.  According to the Student Borrower Protection Center, the guarantee agencies garnished $27.2 million in May 2021 and $12.9 million in June 2021.

Will student borrowers recover these lost wages? Probably. But it will probably take a long time. After all, the Department of Education didn't forgive all student loans taken out by people who were defrauded by ITT Tech until five years after the for-profit college filed for bankruptcy.

The federal student loan program has enormous problems, and some of them will be difficult to fix. But surely, the Department of Education can require the loan guarantee agencies to abide by Department policy and the law.

But apparently, the guaranty agencies think they are above the law. In 2016, Educational Credit Management was assessed punitive damages for repeatedly garnishing the wages of a bankrupt student debtor in violation of the Bankruptcy Code. 

In an earlier case, ECMC was sanctioned for violating the Bankruptcy Code by collecting on a debt discharged in bankruptcy. 

Perhaps, you might conclude, the guaranty agencies inadvertently violate the law because they don't have the financial resources they need to keep track of their legal obligations. But that conclusion would be incorrect. According to a report issued by the New Century Foundation in 2016, Educational Credit Management, a nonprofit corporation, had more than $1 billion in nonrestricted assets.

Congress has a lot to do to clean up the student-loan mess, but it might start by holding hearings to examine the practices of the guaranty agencies.  Congress might begin by asking why some of the guaranty agencies are so rich. It might also inquire into the agencies' attorney fees the agencies run up chasing distressed student-loan debtors into the bankruptcy courts. 

Finally, Congress might look into how much the guaranty agencies are paying their senior management.  More than ten years ago, Bloomberg reported that the current CEO of ECMC was making more than $1 million a year.  What do you think ECMC's current CEO makes?  My guess--somewhere in the high seven figures. 

We don't need no stinkin' pause on student-loan collections.

"This student loan case fits the definition of insanity": Bankruptcy judge grants 56-year-old Kansan partial relief from his student-loan debt

 In Goodvin v. Educational Credit Management Corporation, Judge Dale Somers, a Kansas bankruptcy judge, began his opinion with these words:  "This student loan case fits the definition of insanity."

Judge Somers went on to chronicle the story of Jeffrey Goodvin. 

Mr. Goodvin attended Wichita State University for four years (1982-1986) but did not obtain a degree. He enrolled at Brooks Institute of Photography in 1987 and got a bachelor's degree in fine arts in 1990. In 2007, he enrolled at Santa Barbara City College and obtained a certificate in multimedia studies. 

Goodvin made repeated attempts to find steady employment over many years, but he worked in an unstable industry.  Judge Somers summarized Mr. Goodvin's job history as being "marked by several relocations, intermittent job loss, layoffs, and periods of unemployment, through no apparent fault of his own." In 2018, Goodvin entered an apprentice program with the Plumbers and Pipefitters Union. 

By the time Goodvin filed for bankruptcy in 2019, he was 56 years old, and he owed $77,000 in student loans. Educational Credit Management Corporation (ECMC) held Goodvin's largest loan, a consolidated loan that Goodvin took out in 1992. 

And here is where Judge Somers found insanity. The principal of Goodvin's consolidated loan was only $12,077, and Goodvin had paid $19,527 on that loan--more than 150 percent of the amount that was disbursed. But interest on that loan accrued at 9 percent. By the time Mr. Goodvin filed for bankruptcy, he owed $49,000 on that $12,000 loan. 

Predictably, ECMC argued that Mr. Goodvin should be placed in the Department of Education's REPAYE plan, a 20-year income-based repayment plan that would end when he was 76 years old. ECMC did not contend, however, that Goodvin would ever pay off his student loans. In fact, Judge Somers noted dryly, "To argue otherwise would strain incredulity."

Naturally, Mr. Goodvin did not want to enroll in a repayment program that would not end until he was ten years into retirement. Moreover, as Judge Somers pointed out, Goodvin's payments under a REPAYE plan would not cover accruing interest. As Judge Somers observed, "Goodvin's reluctance to participate in the REPAYE plan for another twenty years is not a lack of good faith; it's called hopelessness."

Very sensibly, Judge Somers granted Mr. Goodvin partial relief from his student debt. The judge discharged the consolidated loan, which he described as "the elephant in the room."  That loan, accruing interest at 9 percent, amounted to 64 percent of Goodvin's total student-loan indebtedness. 

That leaves Mr. Goodvin with an obligation to pay back $27,689, an amount that he can probably manage.

Judge Somers' sensible and refreshing decision is a sign that the federal bankruptcy courts are recognizing the enormity of the student-loan crisis.  ECMC appealed to the U.S. district court, but Judge John Lungstrum upheld  Judge Somers' ruling.

This is the third bankruptcy court decision out of Kansas in recent years to grant a partial discharge of student loans. ECMC was a defendant in all three cases, and it appealed all three decisions. Remarkably, federal district courts, acting in their appellate capacity, upheld the bankruptcy judge in all three matters.

Judge Somers was right: The Goodvin case fits the definition of insanity. His decision, thank God, restores some sanity to Mr. Goodvin's life, which should hearten us all.

References

Goodvin v. Educ. Credit Mgmt. Corp., Case No. 19-10623, Adv. No. 19-3105, 2020 WL 6821867 (Bank. D. Kan. Sept. 9, 2020), aff'd, Educ. Credit Mgmt. Corp. v. Goodvin, Case No. 20-cv-147-JWL (D. Kan. March 17, 2021).

Laurina Bukovics v. ECMC: An Illinois woman took out $20,000 in student loans, paid back $29,000 and still owed $80,000

Laurina Kim Bukovics enrolled as a freshman at the University of Wisconsin in 1985 and graduated five years later. She took out about $20,000 in student loans to finance her studies. Over the years, she paid back $29,000--almost 140 percent of the principle. 

Nevertheless, 25 years after she graduated, Bukovics owed $80,000 on her student loans--four times what she borrowed.  Even though she had made 99 loan payments between 1999 and 2015—equivalent to more than eight years of twelve monthly payments-- her college-loan debt had quadrupled due to accumulating interest.

In 2015, Bukovics sought bankruptcy relief. Two years later, she filed an adversary proceeding to discharge her student loans. In 2018, while her adversary proceeding was pending, Bukovics lost her job.

Educational Credit Management Corporation, the federal government's ever-diligent debt collector, opposed a discharge of Bukovics's student-loan debt. ECMC argued that Bukovics could not meet the "undue hardship" test because she had not tried to maximize her income and not lived frugally.

In particular, ECMC accused Bukovics of spending too much money on food and not being diligent enough in looking for work.  Her job search was too narrow, ECMC claimed. 

In deciding Ms. Bukovics's case, Bankruptcy Judge Jack Schmetterer applied the three-part Brunner test to determine whether Bukovics could repay her student loans while still maintaining a minimal standard of living.  After conducting an extensive analysis of Bukovics's financial history, Judge Schmetterer ruled in her favor.

Clearly, Judge Schmetterer concluded, Bukovics could not maintain a minimal standard of living if she were forced to repay her student loans. After all, Bukovics was unemployed, temporarily living rent-free with a friend, receiving government nutritional assistance (food stamps), and getting her health care through Medicaid.

"Put simply, Judge Schmetterer wrote, given Bukovics's "frugal lifestyle and overall significant budget shortfalls, including the lack of money to provide for even basic needs, she would be unable to maintain a minimal standard of living if required to repay her student loan" (Bukovics v. ECMC, p. 189).

Judge Schmetterer rejected ECMC's arguments that Bukovics had spent too much money on food. On the contrary, he commented, spending $360 for sustenance over two to three months was not excessive.

In any event, Judge Schmetterer observed, ECMC's position "misses the point" (p.188). In the judge's opinion, ECMC was inappropriately looking for pennies that Bukovics might save when it was evident that her income was inadequate to meet her basic human needs.

Judge Schmetterer also rejected ECMC's claim that Bukovics had not looked hard enough for a job.  The judge pointed out that she had applied for over 200 positions over sixteen months and that several applications had led to job interviews (p. 187). Although the judge acknowledged that Bukovics voluntarily gave up her last job, she had testified that she had been pressured to quit and that her position had been eliminated after she terminated her employment.

Implications of the Bukovics decision

The Bukovics opinion is remarkable not so much because Laurina Bukovics won her case but for the fact that ECMC, the Department of Education's designated representative, would oppose her.

Ms. Bukovics borrowed $20,000 to obtain a bachelor's degree from a well-respected public university. She repaid $29,000 by making almost 100 monthly payments. Although financial circumstances forced her to skip monthly payments from time to time, the Department of Education acknowledged her hardship by granting her 10 deferments or forbearances.

Thirty years after graduating, Bukovics had reduced her debt by one dime. In fact, she owed four times what she borrowed. She was in her early fifties and out of a job.

What reasonable person would argue that Laurina Bukovics should not be freed of debt she can never repay?  And yet ECMC, representing the United States government, made that argument.

Today, the American economy is crippled by the coronavirus pandemic, and the nation's unemployment rate is 15 percent. Millions of people are living in circumstances similar to those of Ms. Bukovics.  Surely we need a more compassionate and efficient way of freeing destitute Americans from unmanageable debt than applying the outdated and callous Brunner test that examines how much an unemployed person spends on food.

References

Bukovics v. Educational Credit Management Corporation, 612 B.R. 174 (Bankr. N.D. 2020).

Judge Jack Schmetterer: ECMC missed the point

Betsy DeVos' Education Department is a clown car, but no one is laughing

For the last three years, the national political debate has focused on international issues: Russia, Ukraine, and now Syria. But look at what's happening at home. More than 45 million people are indebted by student loans, and more than half of these debtors cannot repay what they borrowed. In effect, they are victims of financial homicide.

Betsy DeVos, President Trump's Education Secretary, is spectacularly indifferent to this crisis, and she has made the crisis worse by her callousness and craven obsequence to the for-profit college industry. Without a doubt, she is guilty of malfeasance and venality. Let's summarize her reprehensible conduct:

Public Service Loan Forgiveness. The Department of Education has flatly refused to administer the Public Service Loan Forgiveness program (PSLF) competently.  More than three-quarters of a million borrowers were qualified for the  PSLF program by Navient, DOE's contracted loan servicer. But DOE has only approved roughly 1 percent of the applications for loan forgiveness. Apparently, DOE takes the position that 99 percent of the people who believed they were qualified for PSLF loan forgiveness were mistaken.

A federal judge ruled last February that DOE had administered PSLF arbitrarily and capriciously in a lawsuit brought by the American Bar Association. Later, the American Federation of Teachers sued DOE, arguing, like the ABA, that DOE was administering DOE in violation of the Administrative Procedure Act.  Has Betsy made amends? No.

Borrower Defense Program.  The federal government has a"borrower defense" process in place for student-loan borrowers to have their student loans forgiven if they can show that their for-profit college defrauded them. A few weeks ago, DOE issued new rules for administering the program. Betsy will allow the for-profit colleges to force students to sign covenants not to sue and waive their right to join class-action lawsuits. DOE's revised rules for processing borrower-defense claims are so onerous that DOE itself estimates that only 3 percent of applicants will get relief.

Student-Loan Bankruptcies.  DOE continues to take the position that distressed student-debtors are ineligible for bankruptcy relief, no matter how desperate the debtor's circumstances.  DOE has a policy in place (perhaps unwritten) that authorizes Educational Credit Management Corporation to assume the right to fight student-bankruptcy cases, and ECMC fights them all.  ECMC, by the way, has accumulated a billion dollars in unrestricted assets--a fat reward for naked brutality.

Betsy DeVos, a multi-millionaire who owns a huge yacht, presides over this clown car of an Education Department, which she has stuffed with cronies from the for-profit college industry. And the taxpayers provide her with a personal security detail that costs almost $8 million a year.

This clown car is not funny. Surely DeVos' maladministration of the Public Service Loan Forgiveness program, apart from everything else she has done or failed to do, provides ample grounds for impeachment.  I feel sure that if the Democrats voted articles of impeachment against her in the House of Representatives, some Republicans would vote for it.

And, if her reckless and lawless behavior was brought to the U.S. Senate, I think there would be enough bipartisan votes to remove her from office.

 Without question, 45 million student-loan borrowers would be interested in the outcome of any impeachment proceedings, and several million of these people are probably single-issue voters. In other words, millions of college-loan debtors will vote for the presidential candidate in 2020 who promises student-loan debt relief.  That candidate is not the guy who appointed Betsy DeVos to run the Department of Education.

Betsy DeVos's Education Department is a clown car.

The great national shakedown: Student loans are dragging down both young and old

According to New York Times writer David Leonhardt, the Millennial generation is being "fleeced" by an economic system that favors the old over the young. For Millennials, Leonhardt points out, incomes are stagnant, and the wealth gap between Baby Boomers and younger Americans is growing.

"Given these trends," Leonhardt writes, "you'd think the government would be trying to help the young." But it is not doing that, Leonhardt argues. Instead government policy is making it harder for younger Americans to climb the economic ladder.

The biggest example of this myopic governmental policy, according to Leonhardt, is higher education. "Over the past decade, states have cut college funding by an average of 16 percent per student," Leonhardt writes, forcing students to borrow more and more money.

Of course Leonhardt is right. Burdensome student loans are making it more and more difficult for young Americans to buy homes and start families. Literally millions of Americans are not able to service their student-loan obligations and are being forced into long-term income-based repayment plans that can stretch out for two decades or even longer.

But we should be careful about characterizing the student-debt crisis as an outcome of inter-generational injustice because in fact Americans of all ages are being dragged down economically by student-loan debt. As a zerohedge.com writer observed recently:

Though millennials catch the most flack for taking out hundreds of thousands of dollars in student loans to pay for worthless college degrees that do little to improve their financial prospects in the "real world," for older Americans who take out loans to finance their education later in life, the repercussions can be ten times worse.

On average, the writer reported, student borrowers in their 60s owed almost $34,000 in student loans in 2017, up 44 percent in just seven years. About 200,000 people age 50 or older are having Social Security checks or other government payments garnished due to student-loan defaults. Total student-loan indebtedness by people in their 60s and older more than doubled in just seven years--from $33 billion in 2010 to $86 billion in 2017.

Most elderly college-loan borrowers accumulated debt to finance their own postsecondary studies but thousands of parents took out Parent Plus loans to finance their children's college education. According to Josh Mitchell of the Wall Street Journal, 330,00 Americans, representing 11 percent of Parent Plus borrowers, had gone at least a year without making a payment on their Parent Plus loans as of September 2015.

Insolvent older Americans have filed bankruptcy to discharge their massive student-loan debt, but the Department of Education and its contracted debt collectors almost always oppose bankruptcy relief. In a Kansas bankruptcy action, Educational Credit Management Corporation (ECMC) fought bankruptcy relief for Vicky Jo Metz, a 59-year-old woman who had borrowed about $17,000 to attend community college in the early 1990s and had seen her total debt quadruple in size due to accruing interest.

Put Ms. Metz in an income-based repayment plan (IDR), ECMC demanded. But a Kansas bankruptcy court disagreed.  If Metz entered into a 25-year IDR plan, the court observed, she would be 84 years old before her repayment obligations came to an end. Moreover, her debt would continue to grow even if she faithfully made her monthly loan payments for a quarter of a century. The judge sensibly forgave all the accumulated interest on Ms. Metz's debt, requiring her only to pay back the principal.

We should be careful about framing the student-loan crisis as a burden that falls mainly on the young. People of all ages are burdened by staggering levels of student-loan debt.  And it is the elderly who most merit relief.

Our government could implement some modest reforms to help relieve the suffering of older student-loan debtors. For example, Senators Elizabeth Warren and Clair McCaskill supported legislation to stop the garnishment of Social Security checks due to student-loan default.  And the Department of Education could stop opposing bankruptcy relief for older student-loan debtors like Ms. Metz.

As for me, I will support any candidate for the presidency who endorses substantive relief for the millions of Americans of all ages who have been fleeced by the federal student-loan program. In my view, free college in the future, which Senator Kamala Harris proposes, does not go nearly far enough toward reforming the federal student loan program--now totally out of control.

Income-Based Repayment Plans for Student Debtors: Is Betsy DeVos a Slave Trafficker?

To my astonishment, Betsy DeVos, President Trump's Secretary of Education, publicly admitted that the federal student-loan program is a disaster. In a speech she gave last November, DeVos acknowledged that only 1 out of 4 student debtors (24 percent) is making loan payments that cover both principal and interest and that 43 percent of all student loans are in "distress."

Unfortunately, DeVos's Department of Education and its contracted debt collectors are making this crisis worse.  Probably 20 million Americans would be eligible to discharge their student loans in bankruptcy if these loans were treated like any other consumer debt (credit cards, auto loans, etc.) But the Bankruptcy Code's "undue hardship" rule, interpreted harshly by many bankruptcy judges, has pushed millions of distressed student-loan debtors into lifetimes of servitude.

Every few months, however, a bankruptcy judge rules compassionately and sensibly and discharges some student loan debt. There is now a good-sized body of cases that have ruled in student debtors' favor.

You would think the Department of Education would encourage this trend, which would hasten relief to millions of destitute student borrowers. If DOE would endorse the Seventh Circuit's ruling in Krieger, the Eighth Circuit Bankruptcy Appellate Panel's decision in Fern, the Sixth Circuit's ruling in Barrett, the Tenth Circuit's ruling in Polleys, and the Ninth Circuit Bankruptcy Appellate Court's ruling in Roth, we would be moving a big step forward toward granting debt relief to millions of honest but unfortunate student borrowers.

But that has not been what Betsy's DOE has done. DOE and its student-loan servicing companies (primarily Educational Credit Management Corporation) have fought bankruptcy relief in bankruptcy courts all over the United States.(The Roth, Myhre and Abney cases are particularly shocking).

And here's one current example. Vicky Jo Metz, a 59-year old woman, attempted to discharge her student loans in bankruptcy, and a sympathetic Kansas bankruptcy judge granted her a partial discharge. Metz had borrowed  $16,663  back in the early 1990s to attend community college but she was never able to pay off her student loans. In fact, she filed for bankruptcy relief more than once.

By the time she was in her late 50s, Metz's student -loan debt had grown to $67,000, because her loan balance continued to grow due to negative amortization.  Judge Robert Nugent concluded Metz could never pay back what she borrowed plus the accumulated interest, and he crafted a sensible and compassionate ruling. Judge Nugent forgave the accumulated interest on Metz's debt and ordered her to pay back the principal--$16,663.

That's a fair solution, and in my opinion, Judge Nugent's ruling was consistent with guidance from the Tenth Circuit Court of Appeals in the Polleys decision. (Metz's Kansas bankruptcy court is in the Tenth Circuit.) The Polleys ruling had instructed lower courts not to interpret the Bankruptcy Code's "undue hardship" provision in a way that would nullify the central purpose of bankruptcy, which is to give an honest debtor a "fresh start."

ECMC, DOE's chief pugilist in the bankruptcy courts, appealed Judge Nugent's decision. Metz should be placed in a long-term income-based repayment plan, ECMC argued, a plan that would require Metz to make monthly payments on her debt for as long as 25 years.

Judge Nugent had rejected ECMC's arguments in his court, pointing out that Metz would be 84 years old when her payment obligations ended. Moreover, Judge Nugent noted, Metz's debt would continue to grow because Metz's payments would not be large enough to cover accumulating interest. Judge Nugent calculated that Metz would owe $157,000 when her payment obligations ended--9 times what she borrowed back in the 1990s!

ECMC's arguments in Vicky Jo Metz's case are either deeply cynical or insane. Basically, ECMC, DOE's hired gun in this dispute, is asking a federal court to sentence Vicky Jo Metz to a lifetime of servitude--paying on a student-loan debt, which will grow bigger with each passing month.

In effect then, the Department of Education and ECMC are slave traffickers, condemning millions of Americans to repayment programs which can stretch over their entire lives.

In my view, the federal courts are poised to craft more compassionate standards for discharging student loans in bankruptcy, which would allow decent people like Ms. Metz to clear away debt they will never repay.  Unfortunately Betsy DeVos's Department of Education and ECMC are doing every thing they can to persuade the federal judiciary not to rule compassionately.

After all, there's a lot of money in the slave trade.

Cases

Abney v. U.S. Dept. of Educ. Corp.  (In re Abney), 540 B.R. 681 (Bankr. W.D. Mo. 2015).

Barrett v. Educ. Credit Mgmt. Corp., (In re Barrett), 487 F.3d 353 (6th Cir. 2007).

Educ. Credit Mgmt. Corp. v. Polleys (In re Polleys), 356 F.3d 1302 (10th Cir. 2004).

Fern v. FedLoan Servicing (In re Fern), 553 B.R. 362 (Bankr. N.D. Iowa 2016), aff’d, 563 B.R. 1 (B.A.P. 8th Cir. 2017).

 Krieger v. Educ. Credit Mgmt. Corp., 713 F.3d 882 (6th Cir. 2013).

Metz v. Educ. Credit Mgmt. Corp., 589 B.R. 750 (Bankr. D. Kan. 2018), on appeal. 

Murray v. Educ. Credit Mgmt. Corp. (In re Murray), 563 B.R. 52 (Bankr. Kan. 2016), aff’d, No. 16-2838, 2017 WL 4222980 (D. Kan. Sept. 9, 2017).

Myhre v. U.S. Dep’t of Educ. (In re Myhre), 503 B.R. 698; 2013 (Bankr. W.D. Wis. 2013).

Roth v. Educ. Educ. Mgmt. Corp. (In re Roth), 490 B.R. 908 (B.A.P. 9th Cir. 2013).

References

DeVos, Betsy, Secretary of Educ., Prepared Remarks by U.S. Secretary of Education Betsy DeVos to Federal Student Aid’s Training Conferences (Nov. 27, 2018). Available at https://www.ed.gov/news/speeches/prepared-remarks-us-secretary-education-betsy-devos-federal-student-aids-training-conferencet.

ECMC screws up: Couldn't prove Mr. Rowe owed on his daughter's student loan

Educational Credit Management Corporation [ECMC]  is the Department of Education's premier student-loan debt collector.

ECMC has appeared in literally hundreds of student-loan bankruptcy cases, and it knows all the legal tricks for defeating a student-loan borrower's efforts to discharge student loans in bankruptcy. And most of the time ECMC wins its cases.

But not always.

 Last June, Judge Catherine Furay, a Wisconsin bankruptcy judge, ruled in favor of Thomas Rowe, who sought to discharge a student loan he said he didn't owe. ECMC claimed Rowe signed a student loan on behalf of his daughter. Rowe said he didn't sign the loan and that any signature appearing on the loan document must be a forgery.

Rowe declared bankruptcy and filed an adversary proceeding to discharge the student loan ECMC claimed he owed. A trial date was set, but neither Rowe nor ECMC filed the disputed loan document with the court.

Judge Furay ordered the parties to file briefs on the burden of proof and concluded the burden was on ECMC to prove Rowe owed on the student loan. Since ECMC did not produce the loan document, Judge Furay discharged the debt.

What the hell happened?

How could ECMC,, the most sophisticated student-loan debt collector in the entire United States, not produce the primary document showing Rowe had taken out a student loan?

I can think of only two plausible explanations. First, ECMC may have had the loan document in its possession but didn't produce it because the document would show Rowe was right-- he hadn't signed the loan agreement.

Second, the loan document may have gotten lost as ownership of the underlying debt passed from one financial agency to another.

Here is the lesson I take away from the Rowe case. If you are a student-loan debtor being pursued by the U.S. Department of Education or one of  DOE's debt collectors, demand to see the documents showing you owe on the student loan.

 Most times, the creditor will have the loan document, but not always.  And, as Judge Furay ruled, the burden is on the creditor to show a loan is owed.

And so I extend my hearty congratulations to Thomas Rowe, who defeated ECMC, the most ruthless student-loan debt collector in the business. Thanks to Judge Furay's decision, Mr. Rowe can tell ECMC to go suck an egg.

References

Rowe v. Educational Credit Management Corporation, No. 17-0033-cf ( Bankr. W.D. Wis. June 28, 2018) (unpublished).

Martin v. ECMC: Iowa bankruptcy judge discharges unemployed lawyer's student loans

In Martin v.  Educational Credit Management Corporation (ECMC), decided last February, Janeese Martin obtained a bankruptcy discharge of her student-loan debt totally $230,000. Judge Thad Collin’s decision in the case is probably most significant for the rationale he articulated when he rejected ECMC’s argument that Martin should be placed in a 20- or 25-year, income-based repayment plan (IBRP) rather than given a discharge.

Citing previous decisions, Judge Collins said an IBRP is inappropriate for a 50-year-old debtor who would be 70 or 75 years old when her IBRP would come to an end. An IBRP would injure Martin’s credit rating and cause her mental and emotional hardship, the judge wrote. In addition, an IBRP could lead to a massive tax bill when Martin's plan terminated in 20 or 25 years, when she would be "in the midst" of retirement.

Janeese Martin, a 1991 law-school graduate, is unable to find a good law job

Janeese Martin graduated from University of South Dakota School of Law in 1991 and passed the South Dakota bar exam the following year. In spite of the fact that she held a law degree and a master's degree in public administration, Martin never found a good job in the field of law. 

Martin financed her undergraduate studies and two advanced degrees with student loans totally $48,817. In 1993, she consolidated her loans at an interest rate of 9 percent; and she made regular payments on those loans from 1994-1996. 

Over the years, there were times when Martin could make no payments on her student loans, but she obtained various kinds of deferments that allowed her to skip monthly payments while interest accrued on her loan balance. By 2016, when Martin and her husband filed for bankruptcy, her student-loan debt had grown to $230,000--more than four times what she borrowed.

As Judge Collins noted in his 2018 opinion, Janeese Martin was 50 years old and unemployed. Her husband Stephen was 66 years old and employed as a maintenance man and dishwasher at a local cafe. The couple supported two adult children who were studying at the University of South Dakota and had student loans of their own. The family's annual income for 2016 was $39,243, which came from three sources: Stephen's cafe job, his pension and his Social Security income.

Judge Collins reviewed Janeese's petition to discharge her student loans under the "totality of circumstances" test, which is the standard used by the Eighth Circuit Court of Appeals for determining when student loans constitute an "undue hardship" and can be discharged through bankruptcy. 

Martin's Past, Present, and Reasonably Reliable Future Financial Resources

Judge Collins surveyed Martin's employment history since she completed law school. In addition to three years working for a legal aid clinic, Martin had worked eight years with the Taxpayer's Research Council, a nonprofit agency located in Iowa.  Her maximum salary in that job had paid only $31,000, and Martin was forced to give up her job in 2008 when her family moved to South Dakota.

ECMC, which intervened in Martin's suit as a creditor, argued that Martin had only made "half-hearted" efforts to find employment, but Judge Collins disagreed. Martin "testified very credibly that she wants to work and has applied for hundreds of jobs," Judge Collins wrote. Nevertheless, in the nine years since her last job, Martin had only received a few interviews and no job offers. 

Judge Collins acknowledged that Martin had two advanced degrees, but neither had been acquired recently. In spite of her diligent efforts to find employment, the judge wrote, she was unlikely to find a job in the legal field that would give her sufficient income to make significant payments on her student loan.

Martin's Reasonable and Necessary Living Expenses

Judge Collins itemized the Martin family's monthly expenses, which totaled about $3,500 a month. These expenses were reasonable, the judge concluded, and slightly exceeded the family's monthly income. Virtually all expenses "go toward food, shelter, clothing, medical treatment, and other expenses reasonably necessary to maintain a minimal standard of living," Judge Collins ruled, and "weigh in favor of discharge" (p. 893).

Other Relevant Facts and Circumstances

ECMC argued, as it nearly always does in student-loan bankruptcy cases, that Martin should be placed in a 20- or 25-year income-based repayment plan rather than given a bankruptcy discharge. The Martin family's income was so low, ECMC pointed out, that Martin's monthly payments would be zero. 

Judge Collins' rejected ECMC's arguments, citing two recent federal court opinions: the 2015 Abney decision, and Judge Collins' own 2016 decision in Fern v. FedLoan Servicing. “When considering income-based repayment plans under § 523(a)(8),” Judge Collins wrote, “the Court must be mindful of both the likelihood of a debtor making significant payment under the income-based repayment plan, and also of the additional hardships which may be imposed by these programs” (p. 894, internal punctuation omitted).

These hardships, Judge Collins noted, include the effect on the debtor’s ability to obtain credit in the future, the mental and emotional impact of allowing the size of the debt to grow under an IBRP, and “the likely tax consequences to the debtor when the debt is ultimately canceled” (p. 894, internal citation and punctuation omitted).

In Judge Collins’ view, an IBRP was simply inappropriate for Janeese Martin, who was 50 years old:

If she were to sign up for an IBRP, she would be 70 or 75 when her debt was ultimately canceled. The tax liability could wipe out all of [Martin’s] assets not as she is approaching retirement, but as she is in the midst of it. If [Martin] enters an IBRP, not only would she have the stress of her debt continuing to grow, but she would have to live with the knowledge that any assets she manages to save could very well be wiped out when she is in her 70s. (p. 894)

Conclusion

Martin v. ECMC is at least the fourth federal court opinion which has considered the emotional and mental stress that IBRPs inflict on student-loan debtors who are forced into long-term repayment plans that cause their total indebtedness to grow. Together, Judge Collins' Martin decision, Abney v. U.S. Department of Education, Fern v. FedLoan Servicing, and Halverson v. U.S. Department of Education irrefutably argue that the harm IBRPs inflict on distressed student debtors outweighs any benefit the federal government might receive by forcing Americans to pay on student loans for 20 or even 25 years--loans that almost certainly will never be paid off.

References

Abney v. U.S. Department of Education, 540 B.R. 681 (Bankr. W.D. Mo. 2015).

Fern v. FedLoan Servicing, 553 B.R. 362 (Bankr. N.D. Iowa 2016), aff'd, 563 B.R. 1 (8th Cir. B.A.P. 2017).

Fern v. FedLoan Servicing, 563 B.R. 1 (8th Cir. B.A.P. 2017).

Halverson v. U.S. Department of Education, 401 B.R. 378 (Bankr. D. Minn. 2009).

Martin v. Great Lakes Higher Education Group and Educational Credit Management Corporation (In re Martin), 584 B.R. 886 (Bankr. N.D. Iowa 2018).

Barbara Erkson v. U.S. Department of Education: A 64-year-old woman, struggling to make ends meet, discharges $107,000 in student loans in bankruptcy

Barbara Erkson, an unmarried 64-year-old woman, filed an adversary proceeding in a Maine bankruptcy court  in an attempt to discharge $107,000 in student loans in bankruptcy. The U.S. Department of Education and Educational Credit Management Corporation (ECMC) vigorously objected, but Judge Peter Carey rejected their heartless arguments and granted Ms. Erkson a full discharge.

This is Ms. Erkson's story as told by Judge Carey. In 1998, when she was in her forties, Erkson enrolled at Vermont College of Norwich University to pursue a Bachelor of Arts in Interdisciplinary Studies. She took out student loans to finance her studies and graduated in 2002 with considerable debt.

After graduating, Erkson worked at various community agencies in order to obtain the conditional licenses necessary to work as a licensed counselor. From 2002 through 2008, she worked at a private counseling service, but her job was terminated due to funding constraints. At some point she defaulted on her undergraduate loans.

Erkson then entered graduate school at Salve Regina University, and she obtained a master of arts degree in Holistic Counseling in 2011. Thereafter she held a series of counseling jobs and maintained a private practice, but she did not make enough money to sustain herself and pay back her student loans.

The U.S. Department of Education and ECMC objected furiously to releasing Erkson from her student debt. She had not shown good faith, they said, because she had not agreed to enter a long-term income-based repayment plan.  They also objected to some of Erkson's expenses. She should not have hired a dog walker, they contended. Nor should she be leasing an automobile. They even criticized her for going to graduate school since her master's degree did not improve her income level.

Fortunately for Barbara Erkson, Judge Carey is a compassionate man; and he waved aside all her creditors' cold-hearted objections.

Plaintiff impresses the Court as a hard-working woman who chose an area of study which, due to changes in federal laws and regulations, proved less profitable than she anticipated. If the Court applied such stringent standards to all student loan challenges, anyone who failed to correctly read the tea leaves of the future and incurred student debt in an area that technology, societal preferences, or legislation later made obsolete would be ineligible for a discharge. The [Bankruptcy] Code simply does not go so far. 

Judge Carey rejected the creditors' argument that Erkson handled her loans in bad faith. They pointed out that her loans were almost always in deferment, forbearance or in default and thus she had made relatively few loan payments. Nevertheless, Judge Carey wrote, "neither DOE nor ECMC challenged [Erkson's] testimony that she struggled to find full time work until 2002 or that, from 2002 until 2008, she did not generate sufficient income to maintain a minimal standard of living and repay her student loans." In Judge Carey's opinion, Erkson's failure to make any meaningful loan payments was "the result of her meager income and not evidence of bad faith."

Interestingly, Erkson argued that she suffered from a hearing impairment that hindered her efforts to find and keep a good job. Judge Carey accepted Erkson's testimony on that point, but he made clear his decision did not turn on Erkson's health situation. Her current financial condition and future economic prospects entitled Erkson to a bankruptcy discharge of her student loans, the judge ruled, without considering her hearing impairment.

What are we to make of the Erkson decision?

First, DOE and ECMC are bullies. Both agencies almost always oppose undue-hardship discharges for distressed student-loan debtors, regardless of individual circumstances.  They always argue that debtors handled their student loans in bad faith and that they should be denied a discharge if they fail to sign up for a 25-year repayment plan. They always quibble about a debtor's routine expenses and pore over a debtor's every expenditure in humiliating detail.

Second, the Erkson decision is a good one for millions of people who took out student loans to pursue careers that did not work out like they planned. How many people have enrolled in chicken-shit for-profit colleges, third-tier law schools, or overpriced professional programs only to learn their educational investments would never pay off?

In the eyes of the U.S. Department of Education and ECMC, DOE's corporate hit man, such people are losers; and their inability to pay back their student loans is prima facie evidence of bad faith.

But Judge Carey disagreed. People who make a sincere effort to find a good job and wind up unable to pay back their student loans while maintaining a minimal standard of living are entitled to bankruptcy relief: period. It's time DOE and ECMC get that message.

The Department of Education and ECMC are bullies.

References

Erkson v. U.S. Department of Education, 582 B.R. 542 (Bankr. D. Me. 2018).

Coplin v. U.S. Dep't of Education: Bankruptcy court orders single mother of 4 disabled children to repay $222,000 in student loans

Heather Coplin graduated from University of Pacific's McGeorge law school in 2009 and gave birth to triplets that same year. The infants were born prematurely and all three suffer from profound disabilities. At age 8, one triplet is incontinent and requires an electric wheelchair for mobility. The other two triplets have muscular issues that impair their mobility. Two triplets have required shunts to drain spinal fluid.

Coplin also has a 15-year-old child who suffers from autism. He is six feet tall, weighs 340 pounds and engages in "anxiety-induced acting-out behavior." Coplin has called the police on several occasions to deal with her son's aggressiveness.

Coplin herself is bipolar and has made several suicide attempts.

Although Coplin graduated law school in 2009, she was unable to pass the state bar exam until 2012. She practiced law for a time and even established her own firm. She found, however, that family issues prevented her from working as an attorney. At time of trial, Coplin was a night-shift waitress at the Muckleshoot Casino

Coplin filed an adversary proceeding in bankruptcy court to discharge almost half a million dollars in student-loan debt, some of it accruing interest at the rate of 10 percent. Navient, one of her creditors, agreed to discharge part of the debt, but three creditors opposed a discharge: ECMC, the U.S. Department of Education and University of the Pacific.

In a decision entered a few days ago, Judge Mary Jo Heston granted Coplin a partial discharge. Utilizing the three-pronged  Brunner test, Judge Heston concluded Coplin only met two prongs.

First, Coplin met the first prong, which required her to show she could not pay back her student loans and maintain a minimal standard of living.  She also met a second prong, requiring her to show she had handled her student loans in good faith.

Nevertheless, Judge Heston did not grant Coplin a full discharge. Coplin had about $1850 in discretionary monthly income, the judge pointed out.  She could put that amount toward paying off her student loans. Judge Heston ruled that Coplin could pay back $222,000 over a ten-year period; and thus she only granted Coplin a partial discharge.

It should be pointed out that the only reason Coplin had any discretionary income was that she was living in her fiancee's home rent free. In addition, I don't think the bankruptcy judge accurately estimated Coplin's ongoing medical expenses. Coplin said she visited doctors 6 or 7 times a week due to her children's medical issues.

These are my reflections on the Coplin decision:

First, I was struck by Coplin's strong work ethic. As Judge Heston noted, Coplin had worked continuously at a variety of jobs since graduating from law school. She practiced law, sold real estate, worked as a delivery driver, and finally wound up working the night shift as a casino waitress.  No one can say she didn't do her best to feed her family.

Second, I was shocked by the ruthlessness of Coplin's creditors. The creditors--including the U.S. Department of Education--argued Coplin should be denied a discharge because she had not lived frugally.  They pointed to the fact that she occasionally dined at fast food restaurants, had cable television, and had taken a modest vacation.

Is Betsy DeVos' Department of Education saying that a casino waitress with four disabled children is living extravagantly because she occasionally eats at McDonald's? Yes, it is.

Finally, I was astonished by the arrogance of University of the Pacific, where Coplin went to law school. One would think the university would be embarrassed by the fact that one of its law graduates racked up half a million dollars in student-loan debt (including accrued interest), took three years to pass the bar exam and was working as a waitress 8 years after obtaining her law degree. But no--UP wants its money--at 10 percent interest.

In sum, I found the Coplin decision disheartening. If a waitress with four disabled children can't obtain a complete discharge of her student loans in a bankruptcy court then it is difficult to see how any student-loan debtor is entitled to bankruptcy relief. God help us.

Muckleshoot Casino, where attorney Heather Coplin works as a waitress

References

Coplin v. U.S. Department of Education,  Case No. 13-46108, Adversary No. 16-04122, 2017 WL 6061580 (Bankr. W.D. Wash. December 6, 2017).

ECMC n v. Acosta-Conniff: Just because you made some bad decisions doesn't disqualify you from discharging your student loans in bankruptcy

Alexandra Acosta-Conniff (Conniff), a single mother of two and an Alabama school teacher, took out student loans to further her education; and she eventually obtained a Ph.D. degree from Auburn University.  She made some payments on her loans, but she put them in deferment for several years due to her low income and her family situation.

Interest accrued on the loans while they were in deferment, and by the time Conniff filed for bankruptcy, her loan balance had grown to $112,000.  In 2013, Conniff filed an adversary action against Educational Credit Management Corporation, seeking to discharge her student loans in bankruptcy.

At the trial on her adversary complaint, Conniff (who argued her case without a lawyer), presented evidence that her expenses slightly exceeded her income and that she was only able to make ends meet by getting financial aid from her parents.

ECMC opposed bankruptcy relief, arguing Conniff should be put into an income-driven repayment plan. ECMC also maintained that Conniff had discretionary income she could devote to making loan payments because she made voluntary payments of $220 a month to her retirement plan.

Judge William Sawyer, an Alabama bankruptcy judge, applied the three-part Brunner test to Conniff's circumstances and concluded that she passed all three parts. First, she was unable to pay off her loans and maintain a minimal standard of living for herself and her children. Second, additional circumstances existed showing that it was unlikely that her financial circumstances would improve during the loan-repayment period. Finally, Judge Sawyer was convinced that Conniff had handled her student loans in good faith.

In deciding Conniff's case, Sawyer, wrote that he was familiar with teachers' pay levels in Alabama, and he considered it unlikely that Conniff's pay as a teacher would increase significantly in the years to come. The judge estimated that Conniff's working life would extend no more than 15 years and that she would be unable to repay her student loans in that time period. Thus, Judge Sawyer discharged Conniff's loans in their entirety.

ECMC appealed to a U.S. District Court, arguing that Judge Sawyer had misapplied the Brunner test. Judge W. Keith Watkins, who heard the appeal, sided with ECMC and specifically found that Conniff failed Brunner's second prong because she had not demonstrated additional circumstances showing that it was unlikely she could repay her student loans in the future.

Essentially, Judge Watkins expressed disapproval of Conniff's decision to obtain a Ph.D. "[Judge Watkins] opined that Conniff has only herself to blame for incurring student debt in the pursuit of multiple degrees that she should have known would not lead to an increase in income sufficient to cover the debt."

Adopting a censorious tone, Judge Watkins said this:

Although [Conniff] is not satisfied with the pay the advanced degrees ultimately have yielded, Conniff chose to earn four degrees, funded primarily by student loans, in her preferred career path of education with a general understanding of the benefits she wold obtain from the degrees versus the costs. She admits specifically that she decided to obtain another student loan to earn her pinnacle Ph.D. in special education and agreed to repay it, knowing how the cost of the Ph.D. compared with the increase in pay it would provide. Conniff finds herself in circumstance largely of her own informed decision-making, which although not dispositive is a consideration.

Conniff, who by now had obtained excellent legal counsel in the person of retired bankruptcy judge Eugene Wedoff, appealed the district court's decision to the Eleventh Circuit Court of Appeals. There, she was more fortunate.  The Eleventh Circuit panel reversed Judge Watkin's opinion and remanded Conniff's case for further consideration.

The Eleventh Circuit specifically disapproved of Judge Watkin's conclusion that Conniff failed the second prong of the Brunner test because she "ha[d] only herself to blame" for her student-loan predicament. In the Eleventh Circuit panel's view, this was the wrong way to interpret Brunner's second prong. Thus, the Eleventh Circuit instructed:

[T]he second prong [of Brunner] is a forward-looking test that focuses on whether a debtor has shown her inability to repay the loan during a significant portion of the repayment period. It does not look backward to assess blame for the student debtor's financial circumstances. Thus, even if the court concludes that a debtor has acted recklessly or foolishly in accumulating her student debt, that does not play into an analysis under the second prong. Nor should it be considered on remand in analysis of that prong. [emphasis supplied] 

The Eleventh Circuit decision (which was not published) is not an outright win for Conniff. She must return to the district court to enable Judge Watkins to reconsider her situation under the Brunner test in accordance with the Eleventh Circuit's directive. But it is a good decision overall, not only for Conniff, but for many other student-loan debtors in bankruptcy.

Let's face it. Millions of distressed student debtors are indebted up to their eyeballs by student loans at least partly because they made some questionable decisions. Perhaps they obtained their degrees from expensive for-profit colleges instead of enrolling in a more reasonably priced public institution. Maybe they chose professions that will not lead to high-paying jobs. Perhaps they changed majors midway through their studies and incurred additional costs.

But the Eleventh Circuit of Appeals has ruled that judges should not examine a debtor's past when determining future ability to repay student loans. The second prong of the Brunner test "is a forward-looking test" and "does not look backward to assess blame." 

Thus, although the Eleventh Circuit's decision in Acosta-Conniff v. ECMC did not rule decisively in favor of cancelling Conniff's debt, she can take comfort from the fact that the lower court will consider her circumstances without blaming her for going to graduate school.

 References

Acosta-Conniff v. ECMC [Educational Credit Management Corporation], 536 B.R. 326 (Bankr. M.D. Ala. 2015), reversed, 550 B.R. 557 (M.D. Ala. 2016), reversed and remanded, No. 16-12884, 2017 U.S. App. LEXIS 6746 (11th Cir. Apr. 19, 2017).

ECMC [Educational Credit Management Corporation v. Acosta Conniff], No. 16-12884, 2017 U.S. App. LEXIS 6746 (11th Cir. Apr. 19, 2017) (unpublished opinion).

ECMC [Educational Credit Management Corporation] v. Acosta-Conniff, 550 B.R. 557 (M.D. Ala. 2016), reversed and remanded, No. 16-12884, 2017 U.S. App. LEXIS 6746 (11th Cir. Apr. 19, 2017).

Richard Fossey & Robert C. Cloud. Tidings of Comfort and Joy: In an Astonishingly Compassionate Decision, a a Bankruptcy Judge Discharge the Student Loans of an Alabama School Teacher Who Acted as Her Own Attorney. Teachers College Record, July 20, 2015. ID Number: 18040.

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The Opioid Epidemic and The Student Loan Crisis: Is there a link?

James Howard Kunstler wrote one of his best essays recently about America's opioid epidemic, and he began with this observation:

 While the news waves groan with stories about "America's Opioid Epidemic," you may discern that there is little effort to actually understand what's behind it, namely the fact that life in the United States has become unspeakably depressing, empty, and purposeless for a large class of citizens.

Kunstler went on to describe life in small towns and rural America: the empty store fronts, abandoned houses, neglected fields, and "the parasitical national chain stores like tumors at the edge of every town."

Kunstler also commented on people's physical appearance in backwater America: "prematurely old, fattened and sickened by bad food made to look and taste irresistible to con those sick in despair." And he described how many people living in the forgotten America spend their time: "trash television, addictive computer games, and their own family melodramas concocted to give some narrative meaning to lives otherwise bereft of event or effort."

There are no jobs in flyover America. No wonder opioid addiction has become epidemic in the old American heartland. No wonder death rates are going up for working-class white Americans--spiked by suicide, alcohol and drug addiction.

I myself come from the desperate heartland Kunstler described. Anadarko, Oklahoma, county seat of Caddo County, made the news awhile back due to four youth suicides in quick succession--all accomplished with guns. Caddo County, shaped liked the state of Utah, can easily be spotted on the New York Times map showing where drug deaths are highest in the United States. Appalachia, eastern Oklahoma, the upper Rio Grande Valley, and yes--Caddo County have the nation's highest death rates caused by drugs.

Why? Kunstler puts his finger on it: "These are the people who have suffered their economic and social roles in life to be stolen from them. They do not work at things that matter.They have no prospect for a better life . . . ."

Now here is the point I wish to make. These Americans, who now live in despair, once hoped for a better life. There was a spark of buoyancy and optimism in these people when they were young. They believed then--and were incessantly encouraged to believe--that education would improve their economic situation. If they just obtained a degree from an overpriced, dodgy for-profit college or a technical certificate from a mediocre trade school, or maybe a bachelor's degree from the obscure liberal arts college down the road--they would spring into the middle class.

Postsecondary education, these pathetic fools believed, would deliver them into ranch-style homes, perhaps with a swimming pool in the backyard; into better automobiles, into intact and healthy families that would put their children into good schools.

And so these suckers took out student loans to pay for bogus educational experiences, often not knowing the interest rate on the money they borrowed or the payment terms. Without realizing it, they signed covenants not to sue--covenants written in type so small and expressed in language so obscure they did not realize they were signing away their right to sue for fraud even as they were being defrauded.

And a great many people who embarked on these quixotic educational adventures did not finish the educational programs they started, or they finished them and found the degrees or certificates they acquired did not lead to good jobs. So they stopped paying on their loans and were put into default.

And then the loan collectors arrived--reptilian agencies like Educational Credit Management Corporation or Navient Solutions.  The debt collectors add interest and penalties to the amount the poor saps borrowed, and all of a sudden, they owe twice what they borrowed, or maybe three times what they borrowed. Or maybe even four times what they borrowed.

Does this scenario--repeated millions of time across America over the last 25 years--drive people to despair? Does it drive them to drug addiction, to alcoholism, to suicide?

Of course not.

And even if it does, who the hell cares?

Drug Deaths in 2014

References

James Howard Kunstler. The National Blues. Clusterfuck Nation, April 28, 2017.

Sarah Kaplan.'It has brought us to our knees': Small Okla. town reeling from suicide epidemic. Washington Post, January 25, 2016.

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014. 

Gina Kolata and Sarah Cohen. Drug Overdoses Propel Rise in Mortality Rates of Young Whites. New York Times, January 16, 2016.

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. 

Haeyoun Park and Matthew Bloch. How the Epidemic of Drug Overdose Deaths Ripples Across America. New York Times, January 19, 2017.

Senator Elizabeth Warren and Senate progressives should press for hearings on Educational Credit Management Corporation and the student loan crisis

Senator Elizabeth Warren has had a brilliant career. She grew up in Oklahoma, went to law school, and wound up on the Harvard Law School faculty. Now she is in the U.S. Senate, and pundits say she may run for President in 2020. Impressive!

Somewhere along the way, Senator Warren represented that she had Cherokee blood, although she never provided a shred of evidence to support that assertion. Her claim may have been a factor in getting that cushy Harvard Law School job. But Harvard says no, and Harvard always tells the truth.

Nevertheless, Harvard Law School claimed it had a Native American professor while Warren was on the faculty, without identifying who it was. (To be fair, it may have been Alan Dershowitz).

If Warren misrepresented her heritage to advance her career, we can't be too hard on her. Higher education is a rough business, and Warren certainly played the game better than I did. And, as the song goes that Willie Nelson made famous, Liz only did what she had to do.

But Warren is a senator now, and she has an obligation to do some good for the American people. She claims to be an advocate for distressed student-loan debtors, but what has she done for them?

She's written letters to the Department of Education and spouted a lot of nonsense about the "obscene" profits the government makes off the student-loan program. More substantively, she co-sponsored a bill in 2015 to protect seniors from having their Social Security checks garnished, but the bill never became law.

In my view, Senator Warren could do more to address the student loan crisis than file bills and write letters. Specifically, she should join with other progressives in the Senate and press for Senate hearings on the student loan guaranty agencies and Educational Credit Management Corporation in particular. ECMC is perhaps the federal government's most ruthless debt collector and has amassed a billion dollars in unrestricted assets, at least partly from hounding destitute student debtors.

In the Bruner-Halteman case, for example, ECMC garnished the wages of a bankrupt Starbucks employee 37 times in violation of the Bankruptcy Code's automatic stay provision. A Texas bankruptcy slapped ECMC with $74,000 in punitive damages.

And in the Hann case, ECMC continued trying to collect on a woman's student loans even though a bankruptcy court had discharged those loans on the grounds that she had paid them off.  ECMC only got stung with a small penalty for that misbehavior.

Rafael Pardo and the Century Foundation both established that the federal government is paying ECMC's attorney fees, and ECMC is using its attorneys to ground down overburdened student borrowers in the bankruptcy courts. Many of these destitute people don't have the money to hire a lawyer, but ECMC is paying its lawyers as much as $300 an hour.

The public has no idea what ECMC has been up to, and Senate hearings could shine some light on this sleazy organization. How much is ECMC paying its CEO, Jan Hines, and its other senior executives? What is ECMC doing with its wealth? Why does the Department of Education pay ECMC's attorney fees to engage in what Rafael Pardo described as "pollutive litigation"?

Senator Warren could do a great deal of good if she would use her powers of persuasion to get the Senate Banking Committee to hold hearings on ECMC's shady activities. In fact, if Senator Warren got the opportunity to ask ECMC executives some tough questions, I'll bet she could bring this rotten outfit down.

Senator Warren needs to accomplish something tangible to address the student loan crisis if she wants people to regard her as a consumers' advocate. If she doesn't accomplish something soon, Americans will be forced to conclude she is not really a progressive, just as we know she's not really a Cherokee.

How much does ECMC pay its CEO, Jan Hines?

References

Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).

Hann v. Educational Credit Management Corporation, 711 F.3d 235 (1st Cir. 2013).

John Hechinger. Taxpayers Fund $454,000 Pay for Collector Chasing Student Loans. Bloomberg.com, May 15, 2013.

Joshua Hicks. Did Elizabeth Warren check the Native American box when she "applied" to Harvard and Penn? Washington Post, September 28, 2012.

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student Debt. New York Times, January 1, 2014.

Rafael Pardo. The Undue Hardship Thicket: On Access to Justice, Procedural Noncompliance, and Pollutive Litigation in Bankruptcy. 66 Florida Law Review 2101 (2014).

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. 

Brian Walsh. Elizabeth Warren is Rewriting American History. U.S. News & World Report, April 22, 2014.